Panama Canal locks contractor and client agree new funding arrangement.
The two-month standoff that threatened to derail the $5.2bn (£3.1bn) Panama Canal expansion was resolved late Thursday when the two parties reached an agreement over payments for the locks portion of the project.
The Panama Canal Authority (ACP) and the contractor, Grupo Unidos Por el Canal (GUPC), announced the conceptual agreement and indicated they would sign it this week after reviews by both parties. The accord requires that the project be completed by December 2015 - the previously agreed deadline.
“The Third Set of Locks will be completed within the terms of the contract, as requested from the very first day,” said ACP administrator Jorge Quijano.
According to the agreement, both sides will put up £60M to finance the project while Zurich North America’s £240M performance bond may be used to obtain additional financing to complete the work. GUPC was also granted a moratorium on repayment of £448M in credit lines until 2018.
The £976M in cost overruns alleged by GUPC will continue to be evaluated by the three-step arbitration process laid out in the original contract. These include a £343M claim that the ACP failed to present the necessary information to evaluate the scheme’s concrete mix. That claim is due to be evaluated by the arbitration board in March.
The crisis began on 30 December when GUPC warned that it would stop work on the locks if the ACP refused to pay for growing cost overruns it claimed were caused by faulty technical data provided by the client.
Canal officials said the contractor had to continue work and that claims would be evaluated by arbitration.
On 4 February, the two sides began meeting to discuss the impasse but, on 5 February, GUPC stopped work. The contractor agreed to restart work on 19 February but meetings continued to finalise the financial details of the project.